FTC and PayPal come to a settlement over Venmo’s arbitrarily managing users’ funds

28 February 2018

VenmoA settlement has been reached between the Federal Trade Commission and PayPal over violations committed by PayPal’s subsidiary Venmo, which misled consumers over the procedure for processing the user transactions and the privacy of their information.

According to the complaint filed by the FTC, Venmo sent notifications to its users saying that their funds were credited to their accounts, but failed to notify them of additional measures taken by the payment service to review and cancel the transfers. Customers often found their money frozen or removed from accounts as Venmo took a decision based on its own review of the underlying transaction.

Customers were unable to pay their bills or rent as the money transfer was not honored by Venmo. In some cases customers lost their tickets to events as the payment made online was reversed or cancelled despite the fact that Venmo notified them that the funds were credited to a respective account. Besides, merchants also suffered losses due to Venmo’s arbitrary actions, when they sent items to shoppers relying on Venmo’s notice that the funds have been credited, but shortly after that Venmo reversed the transaction and removed the funds.

Apart from misleading customers about the transaction processing practices, Venmo failed to properly inform customers about the privacy of their personal data and actions taken with their user accounts. Some information is by default displayed in the social news feed of Venmo, and while there are privacy settings at place, Venmo kept quiet about the extent to which such transactions could be viewed by others and the overall process of how these security settings work.

Within the framework of the proposed settlement, Venmo is enforced to change its privacy policy and bring its transaction processing service in compliance with best practices, properly notifying customers of all ensuing consequences of their actions in the account. Venom is prohibited to mislead and misrepresent any restrictions on the use of its services and all privacy controls available to users.

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